IEM Predicts Presidential Outcomes

August 26, 2004 | National Public Radio

The folks at the University of Iowa's business school think they know how to predict the outcome of the presidential election. First, they say, you need to stop thinking of President Bush and John Kerry as candidates and start thinking of them as pork bellies or frozen orange juice -- commodities to be bought and sold. That's exactly what they do at the Iowa Electronic Markets. Traders buy and sell Kerry and Bush contracts, in effect betting on who's going to win in November. The market uses real money, up to $500 per trader. "Presumably, each trader that comes onto our markets hopefully think they know something about what the outcome of the election is likely to be or else they wouldn't be trading," said ROBERT FORSYTHE, co-founder of the Iowa Electronic Markets. Traders put aside who they would like to win in November and focus instead on who they think is going to win. "We can only credit it to the profit motive, that by trying to make a few dollars here, they are able to come up with a pretty good forecast," Forsythe said.